Domestic Inquiry

Definition

An employer-led investigation aimed at discovering facts and information about a situation in which an employer has accused an employee of misconduct. A domestic inquiry typically follows a ‘show cause’ letter, which is sent to the employee requesting a written explanation for the alleged misconduct. If the response is not satisfactory, the employer will move to the more formal domestic inquiry.

Domestic inquiry should be carried out as soon as possible following accusations of misconduct and all activities should be formalized and recorded in full. Legally it is important than the investigation be carried out objectively. The investigating officers, for example, should be unconnected to the incident, and the employee should be given full opportunity to state their own case and present evidence in their favor. Union representatives or colleagues should be allowed to sit in during the process if the employer allows their presence, although the employee can’t insist on legal representation.

Note that the domestic inquiry is purely an information-gathering exercise i.e. the panel tasked with gathering the evidence do not make decisions over guilt or punishment. Their final report is sent to the relevant parties, often senior leaders, who then decide on the appropriate course of action.

Under Malaysian Law

Under Malaysian law, where an employee is subject to the Employment Act 1955 ("Act"), it is a statutory obligation imposed on the employer to conduct a "due inquiry" to ascertain whether an employee is guilty of misconduct before an employee can be dismissed or before any other major penalty is imposed.

However, Section 14(1) of the Act does not specify what amounts to "due inquiry" or how an inquiry should be conducted. While "due inquiry" has a different meaning from "domestic inquiry", some people use these words interchangeably. While a domestic inquiry, if done properly, can amount to "due inquiry" under the law, it does not necessarily mean that a full blown domestic inquiry must be conducted in every case.

Given the complexity above, it natural to find employers (especially those without a proper HR support) who are clueless as to how to conduct a domestic inquiry. The consequence can be serious as a failure to properly conduct an inquiry could result in an unfavourable finding from the Industrial Court in the event the employee files an unfair dismissal claim.

As a general rule, it is important to remember that no employee should be dismissed for misconduct unless the employee concerned has been given an opportunity to defend himself or has been given an opportunity to be heard.

In order to allow employees to properly defend themselves, employers can hold a domestic inquiry which will help them decide whether the misconduct was committed and what sort of punishment should be meted out.

Employment Act 1955

Section 14 (1)

An employer may, on the grounds of misconduct inconsistent with the fulfillment of the express or implied conditions of his service, after due inquiry:

a) dismiss without notice the employee; or

b) downgrade the employee; or

c) impose any other lesser punishment as he deems just and fit, and where a punishment of suspension without wages is imposed, it shall not exceed a period of two weeks.

Section 14(1) above only mentions "due inquiry" but does not provide specific procedures as to how an inquiry should be conducted. Initially employers especially those without proper HR department, had to do what they thought best. Their actions had been challenged and the Industrial Court had handed over numerous decisions on the necessity of holding "domestic inquiry". The Industrial Court always held that natural injustice had not been done if an employer did not hold an inquiry or proper inquiry and the Court would invariably rule against the employer who failed to do this. It is an important principle that no employee should be dismissed for misconduct unless the employee concerned has been given an opportunity to defend himself or had been given an opportunity to be heard.

In order for a domestic inquiry to be properly held, certain procedure needs to be followed. Stated below are some guidelines for a proper inquiry:

Serve on the employee alleged to have committed misconduct a letter containing

• Specific charge of the type of offence, the date, the time and place where the offence took place. Also state which rules or regulations of companies have been violated.
• The date, the time and the place where he has to be present for the inquiry.
• Inform him his right to bring along witnesses if any.
• If necessary, suspend him for not more than two weeks pending the inquiry.

Show Cause Letter

It is important to state the allegations of the misconduct clearly and precisely to the employee. This letter is to call for an explanation for the alleged misconduct and to allow the employee to defend or explain the situation, as well as to state why the employee believes disciplinary should not be taken. A timeline to respond to such letter must be stipulated in the letter. Also, the show cause letter should be drafted in a clear and unambiguous language. Whenever possible, the relevant clause of the company's policy and/or employment contract should be cited.

Example of a badly drafted show cause letter:

"You have breached Company policy and procedure relating to the approval of payment vouchers."

What would be better:

"On 23 January 2015, you had approved payment voucher no. 12455 dated 21 January 2015 ("Voucher"). The Voucher was for payment of the sum of RM10,000.00 to ABC Sdn Bhd for purchase of stationery. As set out in the Company's Approval Authority Matrix, you are only authorised to approve payments up to RM5,000.00 only and any payment exceeding this amount must be referred to and approved by the General Manager. Your approval of the Voucher in excess of your approval authority limit is in breach of the Company's policies and procedures relating to the approval of payment vouchers as set out in Clause 3.5 of the Controller's Handbook."

Response to the Show Cause Letter

The employee should respond the show cause letter within the stipulated timeframe. If the explanation is acceptable or satisfactory, no punishment should be imposed. However, if the employee fails to respond and/or if the explanation is unacceptable, the Company can either (a) take disciplinary action; or (b) if it feels the allegations are serious enough to warrant it, issue a notice of domestic inquiry.

Issuance of Notice of Domestic Inquiry

The Notice of Domestic Inquiry should comprise of the following:-

• specific charge which states the type of offence, the date, the time and place where the offence took place
• details of the domestic inquiry (ie: date, time and place)
• inform the employee his/her right to bring along witnesses or any documentary evidence, if any.
• Suspension

If it is necessary, the employer may place the employee on suspension pending further investigation of the allegation in respect of the misconduct. The suspension can be issued together with the show cause letter, or before the domestic inquiry. A suspension may be granted if the employer feels that it would prevent interference into the investigation or further misconduct.

Under the Act, the maximum period of suspension is not more than 2 weeks with half wages. However, the employer must pay back the remaining wages to the employee if he is later found to be not guilty.  This maximum period of suspension only applies to employees subject to the Act.

Set up a panel comprising of

• Chairman 
• Two independent panel members 
• A prosecutor 

The panel (odd number of persons) must consists of people who are neither directly nor indirectly connected to the matter. Panel members should be employees who are of a higher rank or seniority than the accused employee. Ideally, the employee's direct manager should not sit on the panel as it could give the appearance of bias. To ensure that the domestic inquiry is conducted adequately, the chairman of the panel should have some knowledge of the domestic inquiry process, procedures and regulations relating to employment law.

In the hearing

• The Chairman will begin first by introduce himself and another two panels. Then the Chairman will ask whether the Alleged Employee accept him and the other two panels. If alleged employee accept then the Chairman will continue to read the charge and ask whether alleged employee plead guilty or no. If the alleged employee did not accept the Chairman or the panel alleged employee must state why with reasonable excuse and the matter should be table to the management.
• If the alleged employee pleads not guilty the prosecution will begin first. He is to make out a case against the accused first by producing witnesses who have direct knowledge of case.
• The accused i.e. the employee alleged to have committed the offence, is allowed to question (cross examine) each of the witnesses on the evidence they have given
• After that the accused will be asked enter his defence i.e. to tell his side of the story
• The accused may produce witness or witnesses to support what he has said
• The accused as well as his witnesses are subject to cross examination by the prosecutor.
• The chairman will guide the proceeding and to record the evidence in writing
• Tape-recording of the proceeding may be used.
• Lawyers are not allowed to appear in this type of domestic inquiry but official of the employee's union is allowed.

After the hearing

The panel will discuss the hearing and study the evidence given by both parties and the chairman will submit the panel's finding and recommendations to the Management

Management's decision

• dismiss without notice the employee; or
• downgrade the employee; or
• impose any other lesser punishment as he deems just and fit, and where a punishment of suspension without wages is imposed, it shall not exceed a period of two weeks.